The CSL Limited (ASX: CSL) share price has been an underperforming in 2021.
Since the start of the year, the biotherapeutics giant's shares have gained just under 3%.
This compares to an 11% gain by the S&P/ASX 200 Index (ASX: XJO) over the same period.
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Is the CSL share price underperformance a buying opportunity?
One leading broker that appears to see the underperformance in the CSL share price this year as a buying opportunity is Citi.
According to a recent note, the broker has upgraded the company's shares to a buy rating with a $340.00 price target.
Based on the current CSL share price of $292.85, this implies potential upside of 16.1% over the next 12 months. Citi also expects a dividend yield of ~1.2% in FY 2022, bringing the total return on offer to almost 17.5%.
What did Citi say?
Citi has been looking at the company's acquisition of Vifor Pharma for US$11.7 billion.
While it notes that the transaction value appears reasonably full, it highlights that the Swiss-based biotech giant's revenues have been subdued because of the pandemic. Furthermore, a number of new products have the potential to boost its revenues in the near future.
All in all, Citi believes the Vifor acquisition is likely to be ~9% earnings per share accretive (pre-amortisation) in FY 2023.
It commented: "CSL has announced that the acquisition of Vifor Pharma – it is acquiring the company at CHF165.5 (US$179.25), a ~65% premium to where the stock was trading pre bid discussion and a ~37% premium to the three-month VWAP. We calculate the acquisition to be ~9% accretive to NPATA per share (NPAT before acquisition-related amortization) – a proxy for cash flow. Including amortization, the transaction is expected to be "modestly accretive" to EPS."
"CSL is acquiring Vifor Pharma at roughly ~14x FY23 EBITDA (including the full run rate of US$75m in cost synergies). Time will tell if CSL has paid a full price given that the revenue is currently subdued because of the pandemic, and several new products are yet to launch, but the transaction should be ROIC dilutive in FY23. CSL's management team presented the transaction as being strategically aligned with the existing business," Citi concluded.
